Use the Information for the Question(s)below

question 9

Multiple Choice

Use the information for the question(s) below.
Your firm faces an 8% chance of a potential loss of $50 million next year.If your firm implements new safety policies,it can reduce the chance of this loss to 3%,but the new safety policies have an upfront cost of $250,000.Suppose that the beta of the loss is 0 and the risk-free rate of interest is 5%.
-If your firm is uninsured,the NPV of implementing the new safety policies is closest to:

• A)$2.25 million.
• B)-$.25 million.
• C)$2.5 million.
• D)$2.15 million.

---

Definitions:

Environment Pollution

The contamination of the natural environment by harmful substances or activities, leading to adverse effects on ecosystems and human health.

Ethanol Subsidies

Financial incentives provided by governments to support the production, use, and development of ethanol as a form of renewable energy.

Demand For

Refers to the desire and ability of consumers to purchase goods or services at a given price.

Supply Of

The total amount of a specific good or service that is available to consumers, which can be influenced by factors such as price, production costs, and technology.